8/27/2008 @ 6:00PM

Top Five All-Time Mutual Fund Managers

Great money managers are like the rock stars of the financial world. While Warren Buffett is a household name to many, to stock geeks, Graham, Templeton and Lynch lead to extended conversations on investment philosophies and performance.

The greatest mutual fund managers produced long-term, market-beating returns and helped many individual investors build significant nest eggs. Who made the cut? Read on to find out.

Benjamin Graham

The “father of security analysis” is in the top spot. Benjamin Graham qualifies as a fund manager because he managed the modern equivalent of a closed-end mutual fund with his partner Jerome Newman from 1936 to 1956.

Best Investment: GEICO – It spun off to Graham-Newman shareholders at $27 per share and rose to the equivalent of $54,000 per share.

Estimated Return: Reports vary due to the time period in question as well as the calculation methods used, but John Train reported in The Money Masters (2000) that Graham’s fund, the Graham-Newman Corporation, earned 21% annually over 20 years.

Sir John Templeton

Templeton was a philanthropist, Rhodes scholar, CFA charterholder and a benefactor to Oxford University who pioneered global investing and found the best opportunities in crisis situations. Templeton was knighted by the Queen of England for his contributions.

Best Investment: Templeton bought $10,000 worth of shares of every public European company trading for less than $1 per share at the outset of World War II, including many that were in bankruptcy. After four years, he sold them for $40,000.

Estimated Return: He managed the Templeton Growth Fund from 1954 to 1987. Each $10,000 invested in the Class A shares in 1954 would have grown to more than $2 million by 1992 with dividends reinvested.

T. Rowe Price founded an investment firm in 1937, but he didn’t start his first fund until much later. Price was one of the first to charge a fee based on the assets under management rather than a commission for managing money.

Best Investment:
Merck
in 1940; he reportedly made more than 200 times his original investment.

Results: Individual fund results for Price are not very useful; however, his first fund was started in 1950 and had the best 10-year performance of the decade–approximately 500%.

John Neff

Neff joined Wellington Management Co. in 1964 and stayed with the company for more than 30 years managing three of its funds. One of John Neff’s preferred investment tactics was to invest in popular industries through indirect paths.

Investment Style: Value, or low P/E, high-yield investing.

Best Investment: In 1984/1985, Neff started to acquire a large stake in
Ford Motor
; three years later, it had increased to nearly four times what he’d originally paid.

Results: John Neff ran the Windsor Fund for 31 years ending in 1995 and earned a return of 13.7%, versus 10.6% for the S&P 500 over that time span. This amounts to a gain of more than 55 times an initial investment made in 1964.

Peter Lynch

Lynch is generally considered to be a long-term growth style investor, but is rumored to have made most of his gains through traditional cyclical recovery and value plays. He gave hope to do-it-yourself investors, saying, “Use what you know and buy to beat Wall Street gurus at their own game.”

Investment style: Growth and cyclical recovery

Best Investments: Pep Boys, Dunkin’ Donuts,
McDonald’s

Results: Lynch is widely quote as saying that a $1,000 investment in Magellan on May 31, 1977, would have been worth $28,000 by 1990.

Conclusion

These top money managers amassed great fortunes not only for themselves but for those who invested in their funds as well. One thing they all have in common is that they often took an unconventional approach to investing and went against the herd. As any experienced investor knows, forging your own path and producing long-term, market-beating returns is no easy task. As such, it’s easy to see how these five investors carved a place for themselves in financial history.